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NRI'S Guide to Investing

Who is a NRI?

A Non Resident Indian is an Indian Citizen who stays abroad for employment or for carrying on business or vacation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad.

Who is a Person of Indian Origin (PIO)?

A Person of Indian Origin- 'Person of Indian Origin' (PIO) means a citizen of any country other than Bangladesh or Pakistan, if
  • the person at any time held an Indian passport; or

  • the person or either of his/her parents or any of his/her grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or

  • the person is a spouse of an Indian citizen or of a person referred to in 1 or 2. Investment by PIO in Indian Securities is treated the same as the investment by Non-resident Indians, requires same approvals and enjoys the same exemptions.

What are the advantages available to NRI?

Simpler norms as compared to foreign citizens- NRIs are not required to be registered as Foreign citizens. Reserve Bank of India (RBI) has come up with Portfolio Investment Scheme (PIS). Once registered with PIS, NRIs can directly invest into Indian Stock markets through registered stock brokers.

Easier and simpler taxation- Income Tax Act offers a simpler tax rate for NRIs which is deducted at source for NRIs by PIS. NRIs are not required to file Income Tax returns if they have no other income except from investments.

Freely repatriable- Profits earned on investments are freely repatriable to the respective country of NRI- provided the required Income taxes are paid on the income.

Where can a NRI/PIO open a demat account?

NRI/PIO can open a demat account with any Depository Participant (DP) of NSDL. The category of investor needs to be mentioned as NRI/ PIO. Also, whether the investment is being made under repatriable or non-repatriable option needs to be specified in the DP account holding form.

Can the investments under Repatriable and Non-Repatriable be held in same Demat account?

No. Separate set of accounts are required to be maintained for investments to held under Repatriable and Non-Repatriable option.

I already have investments in my Demat account in India before becoming a NRI? Do I require another Demat account?

Yes. A NRI would be required to change the status of his account from Resident to Non-Resident. However, the investments held before becoming a NRI can only be held as Non-Repatriable.

In case a non-resident Indian becomes a resident in India, will he/she be required to change the status of the holding from Non-Resident to Resident?

Yes. The NRI will have inform the change of status to the designated authorised dealer branch through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom the NRI demat account is held. Subsequently, a new demat account in the resident status will have to be opened and the securities would be transferred from the NRI demat account to resident account. The NRI demat account would then be closed.

Can NRIs invest in shares, debentures and units of mutual funds in India?

NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are available both on repatriation and non-repatriation basis.

Can an NRI purchase securities by subscribing to public issue?

Yes. A NRI can apply for subscribing to shares in public issue. The issuing company is required to issue shares to NRI on the basis of specific or general permission from RBI.

What is Portfolio Investment Scheme (PIS)?

Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India. Investment can be made both on repatriation or non-repatriation basis. To apply for PIS account, an application in prescribed form has to be made to a designated branch of an authorised dealer in India. RBI has authorised a few branches of each authorised dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs.
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